What criteria are used to screen stocks as halal?

Islamic finance scholars generally apply a two-part screening process before a stock is considered halal to invest in. The first is a business-activity screen: the company's core business must not be in a prohibited industry, such as alcohol, gambling, conventional banking and insurance, pork products, weapons used unjustly, or adult entertainment — categories tied to prohibitions like gambling and intoxicants mentioned in the Quran. The second is a financial-ratio screen, since almost no modern public company is entirely free of interest-based debt or income. Common benchmarks (used by indices like the Dow Jones Islamic Market Index or AAOIFI standards) cap interest-bearing debt, interest-based cash/investments, and non-compliant income each at roughly 30-33% of total assets or revenue, and require that any incidental interest income be purified — donated to charity rather than kept or spent. Because thresholds and methodologies vary slightly between screening bodies, and scholars differ on exactly where to draw these lines, many Muslims rely on established halal-stock screening apps or indices rather than assessing companies individually, and some more cautious scholars avoid mixed companies altogether.

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